The Changing Face of Vendors and Frienemies

As Hewlett-Packard Co. works to reverse its downward slide brought on by miscalculations and bad bets over the last decade, many people have wondered what founders Bill Hewlett and Dave Packard would think of their company today. Chances are neither would recognize the enterprise they founded in 1939 in a Palo Alto garage.

Seventy-three years ago, Hewlett and Packard started their company with the invention of the audio oscillator, an electronic test instrument used by sound engineers. The first customer was Walt Disney Studios, which used the device to improve the sound quality of the landmark film “Fantasia.”

Over the decades, HP has produced everything from diagnostic equipment to calculators, watches to personal computers, and, now, desktop printers and cloud computing.

HP isn’t alone in its evolution. IBM started off selling industrial scales. Xerox was originally a photography equipment and paper manufacturer. Symantec Corp.’s first products were PC diagnostic tools and a word processor. One of the “Ts” in AT&T stands for “telegraph.” Motorola started with a battery eliminator and evolved to produce the first commercially viable car radio.

Over time, all companies evolve into something beyond their original intent and founding technologies, spurred by changing market dynamics, and the need to maintain relevancy with consumers and replace revenue sources as products commoditize. These evolutionary forces change the face of vendors and reshape the reseller channel. In fact, some could argue, the channel we have today is a result of this evolution.

In eras past, this process was not unlike natural evolution; it took long periods of time for dramatic changes to manifest as products and brand identities. Xerox, for instance, is a professional services and document management company, but is still known as the brand synonymous with photocopiers. What’s changing is the pace of change as contemporary companies accelerate their evolution to stay relevant.

Three companies to watch in the evolution game: Cisco Systems Inc., EMC Corp. and VMware Inc. These companies, perhaps more than any others, are transforming themselves for market dominance in the cloud and services era.

Cisco faces the biggest challenge in technology evolution. It’s the market leader in routing and networking products, commanding more than 60 percent of the addressable market. While Cisco has made strategic investments over the years, none have come close to replacing or rivaling the networking business. To remain relevant, Cisco tied up with VMware and EMC, most notably through the joint-venture VCE.

VMware, which is owned predominantly by EMC, and EMC itself are rapidly evolving. VMware bought software-designer/networking specialist Nicira from under the nose of Cisco. EMC is looking at other acquisitions, including Brocade Communications Systems Inc., to enter the networking market. EMC is partnering with Lenovo to develop new storage and servers.

In short, VMware and EMC are becoming as much competitors to Cisco as they are collaborators and allies. The slang for this relationship is “frienemy,” a company that’s equally an ally as a competitor.

Frienemies litter the technology landscape. Last Friday, Apple Inc. won a $1.1 billion patent-infringement lawsuit against Samsung, which may lead to the sales ban of popular Samsung products in the U.S. market. Some analysts interpret the ruling as a devastating blow to Samsung’s mobile ambitions. However, the two companies say the ruling won’t affect their supplier relationships, as Samsung will still provide Apple with key components for making iPhones and iPads. In fact, Samsung is investing $3 billion to expand an Austin plant for that very purpose.

Cisco isn’t immune to frienemies. In 2009, it launched the Unified Computing Strategy, which included new servers for virtualized data centers. For the first time, Cisco was looking to sell servers rather than partner with IBM, HP and Dell. The move created friction between their longtime allies, but business continued between them.

Even new companies that acted as alternatives to traditional applications are evolving. Case in point: Salesforce.com is evolving from a CRM in a software-as-a-service model is evolving its model to include social media (Chatter) and soon human resource management (Work.com). These changes are putting it on a collision course with Oracle, which finally shed its ambivalence to cloud computing and claims more than $1 billion in sales.

And, of course, Microsoft is now stirring the frienemy pot with the forthcoming launch of Windows 8 and the Surface tablet. For the first time, Microsoft will field a hardware computing product integrated with its software. Traditional PC OEM partners have had mixed reactions with Acer calling it a mistake and Lenovo chiming that it’s irrelevant.

Perhaps most surprising is non-tech companies becoming competitors. ABB Ltd, a Swiss manufacturer or power transformers, is looking to compete with IBM and HP in providing protection against cyberattacks of industrial control systems. This will put ABB in league with Microsoft and Oracle, who each are aiming to market similar systems.

The point of this review of shifting competitive battle lines is you can never be certain who will be your next competitor. Complacency is the deaths kneel of all businesses. All enterprises – vendor and solution provider alike – must evolve as technologies, trends and customer expectations evolve. In the short run, this evolution will cause conflicts and challenges to solution providers as vendor vie for loyalty and allegiance. In the end, though, these evolutionary forces have the potential of making solution providers stronger by enhancing the value of technology and opening new opportunities.

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